Committee on Children's Television, Inc. v. General Foods Corp.

BIRD, C. J., Concurring and Dissenting.

I concur in Justice Broussard’s opinion but I would answer the question as to whether plaintiffs who are not business competitors can recover damages for harm suffered as a result of unfair competition (Bus. & Prof. Code, § 17200 1 ) or false advertising (§ 17500). Logic, legislative purpose, and the weight of precedent all support the conclusion that noncompetitor plaintiffs may recover damages under these provisions.

I.

The majority suggest that this court need not decide whether damages are available under the unfair competition and false advertising laws because all of the injured plaintiffs may recover damages under their causes of action *224 for fraud. (Maj. opn., ante, at p. 215.) Evidently, the majority view the causes of action for fraud, unfair competition, and false advertising as providing plaintiffs with substantially equivalent opportunities for relief. To the extent that these alternative causes of action require the same type and quantum of proof, I concur in the majority opinion. I write separately, however, because the majority do not address whether the fraud causes of action require proof of the same elements required under the unfair competition and false advertising actions.

Under the traditional view of fraud, a plaintiff must show that the defendant made an untrue assertion of fact, which the defendant either knew to be untrue or had no reasonable ground for believing to be true. (Civ. Code, § 1710, subds. 1 and 2; Hobart v. Hobart Estate Co. (1945) 26 Cal.2d 412, 422 [ 159 P.2d 958 ]; see also Nathanson v. Murphy (1955) 132 Cal.App.2d 363, 367 [ 282 P.2d 174 ].)

By contrast, any statement that is “untrue or misleadingand which the defendant knew or reasonably should have known to be “untrue or mis leadingfalls within the definition of “false or misleading statements” proscribed by the false advertising law. (§ 17500 [former Pen. Code, § 654a], italics added; People v. Wahl (1940) 39 Cal.App.2d Supp. 771, 773 [ 100 P.2d 550 ]; Audio Fidelity, Inc. v. High Fidelity Recordings, Inc. (9th Cir. 1960) 283 F.2d 551, 555 .) And, whether the defendant has engaged in unfair competition in violation of section 17200 (formerly Civ. Code, § 3369, subd. 3) depends upon “whether the public is likely to be deceived . . . .” (Payne v. United California Bank (1972) 23 Cal.App.3d 850, 856 [ 100 Cal.Rptr. 672 ], italics added, citing People ex rel. Mosk v. National Research Co. of Cal. (1962) 201 Cal.App.2d 765, 772 [ 20 Cal.Rptr. 516 ]; see also West v. Lind (1960) 186 Cal.App.2d 563, 567 [ 9 Cal.Rptr. 288 ]; Family Record Plan, Inc. v. Mitchell (1959) 172 Cal.App.2d 235, 245 [ 342 Cal.Rptr. 10 ].) Thus, under the unfair competition and false advertising causes of action, a plaintiff need not prove either: (1) that an assertion of fact was made, or (2) that the assertion was untrue.

It appears, then, that under the traditional view of fraud, plaintiffs must sustain a greater burden to prove fraud than to prove unfair competition or false advertising. Recent developments do suggest, however, that the lines between fact and opinion, and between “untrue” and “misleading” statements, may be more apparent than real, at least in the consumer protection area. In Hauter v. Zogarts (1975) 14 Cal.3d 104 [ 120 Cal.Rptr. 681 , 534 P.2d 377 , 74 A.L.R.3d 1282 ], for example, a manufacturer claimed that its “Golfing Gizmo” was “completely safe,” and that the ball attached to the device “will not hit [the] player.” (Id., at pp. 108, 109.) This claim was *225 held to be an actionable misrepresentation of fact. (Id., at pp. 111-114. 2 ) Justice Tobriner, writing for the court, noted that sellers had traditionally been given a wide latitude to “puff” the virtues of their products, but that “ ‘[t]he tendency of the modern cases is to construe liberally in favor of the buyer language used by the seller in making affirmations respecting the quality of his goods . . . .’ [Citation.] [¶] This expansion of sellers’ liability has been necessary to counteract the shrewd technique of those sellers who, instead of making broad factual assertions about their products, seek to couch their representations in opinion form.” (Id., at p. 112, fn. 7.)

Apparently, the majority assume that similarly expansive definitions of “untrue” and “fact” should be applied here. I have no disagreement with that approach. However, in the absence of a clear statement equating the fraud standard (as applied in the consumer protection area) with that of the unfair competition and false advertising laws, this court should decide whether the injured plaintiffs may recover damages under the latter provisions.

II.

I would hold that injured consumers may state a cause of action for damages under the unfair competition and false advertising laws. The legislative history, purpose, and judicial treatment of the unfair competition law establish that courts may remedy a violation by ¿warding compensatory damages to all injured parties. Since a violation of the false advertising law is also, by definition, a violation of the unfair competition law (§ 17200 3 ), the remedies of the latter section are available in actions brought under the false advertising law.

The unfair competition law codified a longstanding tort doctrine which provided businesses with a remedy for unfair practices committed by their competitors. (See Note, Prevention of Unfair Business Practices in California: A Proposal for Effective Regulation (1980) 32 Hastings L.J. 229 , 236-237.) As originally enacted, the law expressly provided for injunctive relief, but was.silent on damages. (Stats. 1933, ch. 953, § 1, p. 2482. 4 ) Neverthe *226 less, the courts, exercising their inherent equitable powers, consistently ruled that competitors could recover compensatory damages in actions for unfair competition. (See, e.g., Western Electro-Plating Co. v. Henness (1961) 196 Cal.App.2d 564, 572-574 [ 16 Cal.Rptr. 691 ]; Southern Cal. Disinfecting Co. v. Lomkin (1960) 183 Cal.App.2d 431, 448-449 [ 7 Cal.Rptr. 43 ]; Ojala v. Bohlin (1960) 178 Cal.App.2d 292, 302-304 [ 2 Cal.Rptr. 919 ]; Reid v. Mass Co., Inc. (1957) 155 Cal.App.2d 293, 307-308 [ 318 P.2d 54 ]; Hesse v. Grossman (1957) 152 Cal.App.2d 536, 542 [ 313 P.2d 625 ].) In so ruling, the courts implicitly rejected the notion that the unfair competition law, by authorizing injunctive relief, precluded the award of compensatory damages. (Ibid.)

In 1976, the Legislature amended the unfair competition law to provide for restitution as well as injunctive relief. (Stats. 1976, ch. 1005, § 1, pp. 2378-2379.) The law, now codified as section 17200 et seq., remains silent as to compensatory damages. The question then becomes whether compensatory damages, long awarded to business competitors, may be awarded to consumers as well.

The unfair competition law provides absolutely no basis for preferring business competitors over consumers in determining which remedies are available. In Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d 94, 111 [ 101 Cal.Rptr. 745 , 496 P.2d 817 ], an action by consumers for injunctive relief, this court held that the unfair competition law protects consumers as well as business competitors. Indeed, “in a society which enlists a variety of psychological and advertising stimulants to induce the consumption of goods, consumers, rather than competitors, need the greatest protection from sharp business practices.” (Ibid.)

Defendants argue that because the statute is silent on compensatory damages, the sole basis for holding that compensatory damages are available to anyone lies in the old equitable doctrine, which was available only to competitors. This proposition has already been rejected by this court.

In People v. Superior Court (Jayhill Corp.) (1973) 9 Cal.3d 283 [ 107 Cal.Rptr. 192 , 507 P.2d 1400 , 55 A.L.R.3d 191 ], the Attorney General sought restitution on behalf of consumers who had been solicited by means of fraudulent sales presentations. At the time the Jayhill action was filed, the Legislature had not yet amended the statute to provide for restitution. Nevertheless, this court held that courts could use their “general equity jurisdiction” to grant restitution to injured customers. (Id., at p. 286.) “Unless the Legislature—‘in so many words, or by a necessary and inescapable inference’ ’’—imposes a restriction on a court’s equity powers, a court *227 “may exercise the full range of its inherent powers in order to accomplish complete justice between the parties, restoring if necessary the status quo ante as nearly as may be achieved.” (Ibid.)

The precise issue presented here was addressed by the Court of Appeal in United Farm Workers of America v. Superior Court (1975) 47 Cal.App.3d 334 [ 120 Cal.Rptr. 904 ]. Reasoning that Jayhill had implied that damages could be awarded in an appropriate case, the court concluded that a noncompetitor could recover damages under the unfair competition and false advertising laws. (Id., at pp. 344-345.) 5

Defendants urge this court to overrule United Farm Workers and to repudiate the principles announced in Jayhill. To support their position, they point to Chern v. Bank of America (1976) 15 Cal.3d 866 [ 127 Cal.Rptr. 110 , 544 P.2d 1310 ],

In Chern , this court stated without explanation that damages are not recoverable under the false advertising law. ( 15 Cal.3d at p. 875 .) Since the issue of damages for unfair competition was not raised by the parties, this court did not address United Farm Workers, Jayhill, or the numerous cases holding that damages are available to competitors for unfair competition. (See ante, p. 225.)

In my view, Chern should be overruled. Otherwise, this court would be forced to adopt one of two alternatives, neither of which is supported by law or logic. As one alternative, the court could conclude that competitors but not consumers may recover general damages. This approach would require the overruling of United Farm Workers and the repudiation of the sound principles announced in Jayhill. Moreover, to accord competitors but not consumers a damage remedy would directly conflict with this court’s recognition that “consumers, rather than competitors, need the greatest protection from sharp business practices.” (Barquis v. Merchants Collection Assn., supra, 7 Cal.3d 94, 111 .)

As a second alternative, it could be held that no plaintiff may recover general damages for unfair competition or false advertising. This approach *228 would require this court not only to overrule United Farm Workers and to disapprove the reasoning of Jayhill, but also to overrule the many cases which have granted compensatory damages to competitors. These cases rest upon solid principles and should not be disturbed.

In short, to retain Chern , which is unsupported by precedent or reasoning, this court would have to overturn numerous other decisions which are grounded in traditional principles of equity and which are consistent with the purposes of the unfair competition and false advertising laws. (See generally, Note, supra, 32 Hastings L.J. at pp. 241-242.) Accordingly, I would overrule Chern and hold that noncompetitor plaintiffs may state a cause of action for damages under both the unfair competition and false advertising laws.

Unless otherwise noted, all statutory references are to the Business and Professions Code.

In Hauter , this court applied section 402B of the Restatement Second of Torts which provides that a seller who makes to the public “a misrepresentation of a material fact” is liable to a consumer who suffers physical injury as a result of the misrepresentation.

Section 17200 provides: “As used in this chapter, unfair competition shall mean and include unlawful, unfair or fraudulent business practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code.” (Italics added.)

Until 1976, the law was codified as Civil Code section 3369, subdivisions 2-5.

In Jayhill, the Attorney General had sought exemplary damages as well as restitution. This court rejected the exemplary damage claim, but only because “in the absence of statute, exemplary damages are allowed only to the immediate person injured.” (Jayhill, supra, 9 Cal.3d at p. 287.) By negative implication, it is evident that exemplary damages could be awarded in a suit brought by an injured customer. And, “[i]t could not be argued with any sincerity that a court which may give exemplary damages may not give general damages. Indeed, it is hornbook law that exemplary damages may not be awarded in the absence of an award of general damages.” (United. Farm Workers, supra, 47 Cal.App.3d at p. 345 .)